Flats in the UK have often been regarded as the bread and butter of the letting industry but now it is being suggested that family houses are much in demand in some areas and provide better returns.
With a booming lettings market in the UK, the residential sector is once again attracting investors’ cash. This is particularly prominent with foreign investors who see the UK’s AAA credit rating as being especially attractive and the UK Government’s policies seen as more robust and safer in the long term than many other developed economies.
‘As we see the lettings market continuing to expand in the Home Counties the demand for more family sized properties is rapidly increasing. The UK is a safe place to invest and with the continuing uncertainty in global stock markets, bricks and mortar are seen as a simple and reassuring investment,’ said James Wyatt, partner of Surrey based letting agents, Barton Wyatt.
However, as with all investments, detailed knowledge of the market you are investing in is essential. The lettings market in the so called golden commuter belt to the West of London in areas such as Virginia Water, Wentworth, Sunningdale, Weybridge, Esher and Cobham are unusual in that they offer expensive and good quality housing in attractive areas which are serviced by several international schools including The American Community School (ACS) in Egham and Cobham, TASIS in Thorpe and ISL in Woking.
This environment has led to demand for lettings properties being skewed very much in favour of four and five bedroom family houses, according to Wyatt. Typically in London and most cities around the country, it is one or two bedroom flats that are the main stay of the lettings market but in these international areas, it is definitely family homes which are in very short supply.
Lettings in the North Surrey area are at record levels, enjoying a boom after a quiet period when many foreign expats were called back to their countries of origin. They are now back with vengeance however, competing with UK tenants who might be waiting for the right homes to buy.
Wyatt suggests that the best price range to invest in is between £600,000 and £2,000,000 per property where returns of about 5 to 6% gross are achievable. This income return together with extremely good prospects for capital growth, make buy to let homes a very attractive proposition.
And for overseas investors, these properties can be sold free of any capital gains tax making them even more desirable.
He said that houses offer better returns, flats have a double management charge – one for your letting agent and another for the block management, flats have longer voids and shorter lets and have more neighbour issues, particularly over noise.
He added that flats are leasehold, houses are generally freehold – a preferred form of investment, flats often have onerous covenants reducing the number of possible tenants, for example pets are often not allowed.
‘And to make a house even more attractive they are mostly let unfurnished with very few exceptions. In our portfolio, just 1 to 2% of family sized houses are furnished as opposed to flats where 50% are furnished, often giving rise to landlord confusion about whether to furnish or not,’ said Wyatt.
An example of an investor who has chosen to buy houses rather than flats is Sally Batchelor who lives in France but bought a four bedroom three bathroom buy to let property in Virginia Water, Surrey.
‘The sales team at Barton Wyatt recommended this area as highly desirable for expats with its security guards and shared amenities such as pool and gym,’ she said. She has now bought another similar property. ‘It is the perfect answer for my investment portfolio and having long company lets gives me complete peace of mind while I get on with my life in France,’ she added.